RR48 - Business Conceptions of Sustainability and the Implications for Accountancy
Bebbington and Thomson, 1996
Executive summary
The 'Earth Summit' in Rio de Janeiro thrust the concept of sustainable development into the international public policy arena as being the appropriate concept to guide environment-human interactions so as to mitigate the perceived environmental crisis. Sustainable development has been variously defined, however it is the Brundtland Report definition which commands the most widespread support. The Brundtland Report defines sustainable development as: development that meets the needs of the present without compromising the ability of future generations to meet their own needs (UNWCED, 1987, p8).
It is not clear what this definition implies, however given the serious nature of environmental concerns, and related social issues, sustainable development has to be the goal of society. This research report attempts to start addressing the question of how the pursuit of sustainable development will affect business and what role, if any, exists for accountancy in this context.
The report is based on a series of semi-structured interviews with 45 individuals from 29 leading organisations in the UK and Europe. Environmental managers and accountants were questioned on a range of issues relating to sustainability.
The Research Findings
Broadly speaking, three key points arose from the interviews conducted.
First, the Brundtland Report definition of sustainability and the need to pursue it as a policy goal is not in question. It was widely recognized by the interviewees that business is not sustainable at present and that human activity, especially in the West, is also not sustainable. In considering sustainability, interviewees readily identified that the pursuit of sustainability required two elements to be addressed - eco-efficiency issues (environmental concerns) and eco-justice issues (social concerns.) Responses from the interviews suggest that, by and large, business has yet to grapple with some of the questions that sustainability raises about the nature of current business activity in and around these dual concerns.
Second, when individuals were asked to consider in detail the implications that arise from the pursuit of sustainability a variety of views were expressed. No coherent picture of what a sustainable society or a sustainable business would look like emerged from the interviews. However, two key issues which require resolution were identified. These were a need to ascertain:
(i) the extent of change that will be required, and in particular, the time scale over which these changes will be pursued, and
(ii) who is responsible for initiating and driving the pursuit of sustainability. While these are undoubtedly going to be a mixture of government, society and business led initiatives, a stalemate situation could well develop whereby each party waits for another to generate the necessary impetus for change.
Before detailed policy and implementation plans can be developed, these questions have to be addressed. From the interviews conducted we would suggest this stage has yet to be reached. However, interviewees were almost unanimous in their views on the respective responsibilities of government and business. Put bluntly, interviewees felt that government should set the goals with regard to sustainability and business should be allowed freedom to innovate to achieve those goals.
Third, accounting, as a powerful driver of current organisational behaviour, is going to be part of any future drive towards sustainability. While ideas about how conventional accounting can be used or reformulated to support sustainability exist, interviewees were almost totally unaware of these suggestions. Having said that, the idea of a sustainable cost calculation (built around calls for full cost accounting) was introduced to the interviewees and this seemed to show some promise as being a mechanism by which to measure the gap between present and more sustainable operations. The appendices to this report contain a brief introduction to different aspects of full cost accounting and the sustainable cost calculation.
Policy Implications for the Accounting Profession.
First, the accounting profession will be faced in the future with the challenge of pursuing sustainability - it is a question of when? not if? Indeed, the EU's Fifth Action Programme (1992) provides early warning that the accounting profession, amongst others, will be asked to play its part in the pursuit of sustainability. As such, it would be judicious to have ready a proactive strategy designating the appropriate role of the accounting profession in this context. The Canadian Institute of Chartered Accountants (1993) provides an example of what a starting point could look like. Such a move would entail a policy for the profession's own contribution to sustainability as well as identifying ways in which its members could assist government and business in a broader pursuit of sustainability.
Second, along with being asked to play a role on a wider stage, the accounting profession also has a role to play in educating its members about sustainability. These interviews highlighted a general business awareness about sustainability. This is potentially deceptive because the organisations spoken to were selected on the basis of the likelihood of their being informed about sustainability. As a result they give an overly optimistic picture of how informed business is. Further, we found that the environmental managers were more informed about sustainability than the accountants (as would be expected) and in nine instances accountants could not be found within organisations who were able or willing to speak with us. This suggests that profession-wide, accountants are unlikely to be knowledgeable about sustainability. This research report plays a role in starting the education process.
The research suggests that there is a need for accountants to appreciate and understand: (i) what the concept of sustainable development entails, (ii) its importance to the future operation of business and (iii) how new accounting techniques to assist the pursuit of sustainability are likely to be developed from the public policy agenda. Accountants have influence over how organisations develop and, in particular, are likely to inhibit organisations' development of sustainability strategies unless they are well informed on the topic and supportive of their organisation's attempts to move in that direction. Such moves are likely to be in conflict with accounting assessments which focus on short term financial criteria.1
Finally, an area of considerable relevance to the accounting profession has been identified -that of full cost accounting, which has also been specifically highlighted by the EU's Fifth Action Programme. Discussions with interviewees indicated that full cost accounting is likely to be a valuable step forward in the sustainability debate because it articulates sustainability in the language of business. It would seem that the proposal of a sustainable cost calculation is one way to explore what full cost accounting could look like and is feasible. Further case study research is required in this area to attempt a sustainable cost calculation in an organisational setting.2 In addition, the role of social accounting in articulating the eco-justice elements of sustainability requires attention. One possible focus of this research could be the social audit process which a few companies are developing and experimenting with (see, for example, Traidcraft Plc and Dey et al., 1995 as well as The Body Shop).